Giving Railways more time for reform is a bad idea

For an organisation on the brink of collapse—40% of its tracks running at more than 100% capacity is a recipe for disaster and 46% of capital expenditure is to come from the government—you would think that urgent reform was critical. And that is what the Narendra Modi government promised through a series of committees, including one headed by Niti Aayog Member Bibek Debroy and former DIPP secretary Ajai Shankar. While Railway minister Suresh Prabhu himself promised a slew of reforms by bringing in more private sector investment, Debroy’s committee took this forward in big way. It recommended, in the interim report, a slew of changes, some of which were simple and some of which were tough, but in the right direction. So, the government was expected to start giving the Railways its share of subsidies upfront, suburban trains were to be hived off to states in order to share the burden of passenger subsidies, private freight and passenger trains were to be brought in under the aegis of an independent regulator. It is not as if all the suggestions were novel ones—as the very first annexure of the interim report brings out, compensation from Centre/states for suburban trains as well as not constructing new lines unless the states paid for them were part of the Kunzru report in 1978.

While it is not the job of committees to handle the political fallout of recommendations, this is what seems to have happened, which is why, while going out of its way to emphasise that it is in favour of ‘liberalisation (and not privatisation)’, the final report is considerably watered down. Some of the reasons for this are valid, most are not. Suggesting private passenger trains, for instance, seemed reformist but was always a stretch given the Railways has no extra capacity—to that extent, recommending that the two new freight corridors be run by an autonomous corporation and give equal access to private operators is a good idea, though it remains to be seen whether even this will be implemented. But why have timelines been extended so much for other changes? Two years for accounting reforms to ensure the Railways include all costs and 3-4 years for the government to start contributing towards the R34,000 crore (in FY15) passenger subsidies? If the Railways are able to calculate this loss and put this in the budget, surely there is a system in place to do this already? If the Railways are not pushed, nothing is going to happen—let’s not forget Kunzru’s recommendations have been lying unheeded for 37 years now. Setting up a regulator now would give the new body time to understand issues—look at how many years the Competition Commission took to really get going—but this is to be tackled within 3 years. The Railway bureaucracy has prevented competition in manufacturing by delaying the award of bids for years, and this is to be perpetuated. So no competition is to be brought in for at least 5 years—existing units, it is suggested, can be freed from the Railway bureaucracy by putting them under an SPV after 5 years; the committee’s faith in how government-owned PSUs are run is touching. With the committee paring down its own expectations, it remains to be seen how Railway minister Prabhu goes about his job of making the Railways more efficient over the next year.